UPDATE: The Senate just passed their “fully loaded” version of the state budget by a 39-0 vote. Not a single dissenting voice in that body over the fact that it contains over $300 million in spending over and above the revenue available to the general fund. Word is the House may pass a concurrence as soon as tonight.
ORIGINAL: Word we received this morning has it that the number of holdouts in the House on the use of one-time money to “balance” Louisiana’s budget is now down to about 30. It would require 36 holdouts to defeat the use of one-time money and prevent an unbalanced budget from passing.
This means that when the Senate completes its work of passing a budget loaded with unaffordable expenses, and sends that budget bill to the House in the closing hours of the legislative session, there will not be enough House votes to block its passage and force a special session that would greatly damage Gov. Bobby Jindal’s chances at getting a vice presidential bid on the Romney 2012 ticket.
The 2012 legislative session, at least where budgetary matters are concerned, now constitutes a “rinse and repeat” of every other recent session.
Stephen Winham, the retired state budget director, described this process perfectly in a letter to the Baton Rouge Advocate today…
Step 1. The governor submits a budget making some cuts and using some speculative financing to create the illusion of a balanced budget.
Step 2. The House further cuts spending in an effort to more closely align spending with revenue that may actually materialize now and in the future.
Step 3. The public and those agencies still not too intimidated to do so raise hell about the cuts.
Step 4. The Senate finds some miraculous means to make everything OK by restoring the cuts with found money and even trickier accounting.
Step 5. The public and agencies breathe a sigh of relief as the budget comes out of a conference committee in a form that appears to keep the sky from falling immediately.
Step 6. After the new year begins and it becomes obvious the budget was never balanced at any point, spending gets cut and/or the rainy day fund is used to again achieve the illusion of balance.
Step 7. Repeat steps 1 through 6.
Winham is exactly correct, though in previous statements he decried the loss of the Stelly tax and he was dead wrong on that – part of the reason why Louisiana is struggling to find enough revenue to pay for its state government now is that for the 10 years the state had the Stelly tax it was shooing its tax base to the friendlier confines across the Sabine River.
In other words, when Stelly was passed, Louisiana wasn’t raising taxes – we were raising Texas.
Stelly wasn’t the answer, and Winham’s perspective as a state bureaucrat wasn’t an accurate one. But he’s precisely correct in that what Louisiana has embarked on since making the correct call to eliminate Stelly is a performance straight out of the Theater of the Absurd.
The next act, of course, sounds like it will be a special session on Louisiana’s business and individual tax breaks – which we’re being told result in the loss of billions of dollars in revenue.
Another compromise being offered is Senate Concurrent Resolution No. 103 by state Sen. Jack Donahue, R-Mandeville, to study the impact of tax credits, exemptions and rebates on the state budget. The thinking is that adjustments eventually might be made to some of those tax breaks to free up state revenue.
The House Committee on House and Governmental Affairs advanced SCR103 Wednesday.
Raising Texas again.
We talked about this yesterday – while there may be a few tax breaks out there the state doesn’t need to provide and while Louisiana’s tax code has descended into the Byzantine just like the federal tax code has, in the main the reason Louisiana has such a panoply of tax breaks and credits is that without them, we cannot compete with Texas next door.
Texas doesn’t need to offer lots of tax breaks. Texas doesn’t have an income tax. When the state next door has no income tax and you do have one, you’ll lose to them when it comes to economic competition. That means the great businesses out there, the talented professionals, the people capable of creating wealth, will leave Louisiana and head west. And that brain drain will have the effect of increasing the percentage of Louisianans needing government assistance – more kids in public school rather than private school, more people on Medicaid, more people on welfare, more people incarcerated.
Meaning the need for a larger state budget without the economy to support it.
Rather than having a special session in order to attempt to find ways to raise Texas through eliminating tax breaks, it would be nice if our political leadership would begin to re-examine exactly how much government it’s imposing on the people of this state.
Why is the Minimum Foundation Program sacrosanct at $3.4 billion? Louisiana is 22nd in the nation in per-student K-12 education funding, with outcomes ranking us 47th. And the state is picking up the lion’s share of the cost for such underperformance. Why shouldn’t the state signal austerity in public education to local school boards, forcing them to make the case to their voters for more self-sufficiency and perhaps local taxes? (The guess is the local voters would respond by demanding those local school boards run tighter ships than they do, and that fiscal discipline would do many of them some good)
Why does the state legislature insist on forbidding colleges from setting tuition and fees at the levels they need to cover their costs? Tuition at Louisiana colleges is cheaper than almost anywhere, and they’re not allowed to increase it. Which is tantamount to the state telling the colleges they have to keep tuition unsustainably low and rely on the general fund for their funding – and the general fund has always been insufficient to fund 14 four-year schools. That’s idiotic; it only makes sense if you’re a politician scared to death of phone calls from parents of college kids and you don’t have the courage to explain to those parents that either tuition goes up or the school their kid goes to might end up eliminating her degree program. The only smart way to handle this is get out of the business of tuition and let the colleges – and the market – handle that issue. But they won’t do that.
Why has there been no effort made in this session – amid glaring budget problems – to reduce the number of four-year college campuses in the state? Last year there was a big fight, which was ultimately lost, to do something about Southern University at New Orleans, the worst-performing and least-necessary campus in the state’s public college system. With a more conservative legislature this time around, no one has the stomach for another SUNO fight? No one is willing to discuss merging other campuses?
Sure, there was talk of merging Louisiana Tech and LSU-Shreveport. But that wasn’t really a merger. That was about making LSU-Shreveport into Louisiana Tech, Shreveport campus. A real merger would entail Louisiana Tech moving its operations to Shreveport, which many Tech supporters think should have been the site of that university from the start, and turning Tech’s Ruston campus into a North Louisiana Community College. Doing that, and fusing Grambling – which is a school that can’t seem to even account for the state dollars it gets every year and as such faces an on-again, off-again battle to keep its accreditation – with that new community college would mean Louisiana could eliminate two campuses which by their own admission are stagnant or struggling. It would also pave the way for Louisiana Tech to become an economic engine in the state’s third largest city which could use a vibrant university. And it would provide a facility for a two-year college that could soak up half the community college students in the northern part of the state.
No politician would agree to such an idea, though it’s a decent bet that more than half of them would agree, given a dearth of resources for 14 four-year campuses, that one prosperous university in Shreveport is smarter than a decent one in Ruston and two poor performers in Grambling and Shreveport. Cowardice trumps vision.
Except it doesn’t, really. Because the cycle Winham describes is going to ultimately force these kinds of choices even if Winham doesn’t understand them. C.B. Forgotston offers us the future in greater detail.
If you can’t listen to the audio, essentially what Forgotston says is that the Revenue Estimating Conference will end up revising its figures downward and opening up a budget deficit. That will mean a minimum mid-year cut of $500 million in December, which will feel more like a billion-dollar cut when you’ve got to cut that amount with six months left in the year, to be followed by another cut in the spring or a deficit for which there will be no “rainy day fund” from which to draw.
And that’s exactly right.
But for right now, the people in the House who understand this stuff are recognizing that they’re wasting their time trying to hold the line. And they’re figuring it’s time to fold the tents and go home, with hopes that maybe things will be better next session.
They won’t be, though. They’ll be worse. And the reckoning is coming. Soon.